Your Federal and State taxes must be paid throughout the year on a “pay as you go” basis. For employees – people who receive a W2 – taxes are withheld from each paycheck. For self employed people, or people who have income in addition to earned income, quarterly estimated taxes are required.
How to Calculate Estimated Tax:
The best way to calculate your estimated tax payments – for both federal and state – is to prepare a projected 2008 tax return. Each quarter you should estimate what your full-year 2008 income will be and calculate the tax you will owe based on this amount.
For example, let’s say you received $100,000 of income in Q1 on which zero taxes were withheld. Let’s also assume that you don’t know what you will receive in the next three quarters – could be more, could be less. Project your 2008 income by annualizing the amount you earned in Q1. In this example, you would project your 2008 earnings to be $400,000. Calculate the federal and state tax you would owe based on this projection. Pay ¼ of this amount by April 15, 2008. Do this each quarter and “true-up” your payments so that you are on track to pay 100% of your tax liability by January 15th, 2009.
2008 Estimated Tax Payment Due Dates:
Q1: April 15, 2008
Q2: June 16, 2008
Q3: September 15, 2008
Q4: January 15, 2009
How to Make your Quarterly Estimated Payments Online:
Enroll in the Electronic Federal Tax Payment System – EFTPS. Each quarter when you determine your tax liability, login to the site to make a payment. Alternatively, write a check and mail form 1040-ES each quarter.
New York State:
Go to the New York State Online Tax Center Website: http://www.tax.state.ny.us/nyshome/online.htm and register. Each quarter when you determine your tax liability, login to the site and make a payment.